Thursday, 19 Aug 2010

EUR/USD Continues To Fall in Overnight Trading

After tumbling in afternoon trading yesterday, the EUR/USD continued to drop in overnight trading, reaching as low as 1.2780. Analysts attribute the drop to the euro's inability to stay above the psychologically significant level of 1.2900. Today, the greenback could see some more gains against its European counterpart, should the weekly unemployment claims and Philly Fed Manufacturing Index show growth in the U.S. economy.

Economic News

After coming dangerously close to again hitting a 15-year low against the yen yesterday, the U.S. dollar appears to have made a steady comeback. The USD/JPY has moved up over 30 pips since yesterday afternoon, and is currently trading around the 85.50 level. Furthermore, the dollar has made substantial gains against both the euro and U.K. pound in overnight trading. The EUR/USD is currently down 50 pips since last night, while the GBP/USD is down around 30 in the same amount of time.

Analysts attribute the dollar's recent gains to rumors that the Japanese government could soon move in to limit the pace of the yen's growth. The yen has seen substantial growth as of late, which generally tends to damage Japan's export driven economy.

Today, the dollar will have several opportunities to extend its gains. At 12:30 GMT, the weekly U.S. unemployment figure is set to be released. Analysts are predicting a slight drop in this week's figure which, if true, would be a welcomed piece of good news for the U.S. economy. An unemployment figure at or below the predicted level of 478K will likely help the dollar maintain its bullish course.

At 14:00 GMT, the Philly Fed Manufacturing Index is forecasted to show further gains in the U.S. manufacturing sector. If the figure comes in as predicted, USD traders may have an excellent opportunity to make some real profits.

EUR - EUR Tumbles vs. Sterling and CAD

The euro fell against most of its main currency rivals throughout the day yesterday and into overnight trading. Investor confidence in the euro's rival currencies, like the U.K. pound and Canadian dollar, was elevated by a series of positive news events.

The minutes of the most recent British Monetary Policy Committee (MPC) meeting, as well as news of a planned acquisition of a major Canadian company, caused both of those countries' currencies to shoot up against the euro. The EUR/GBP has fallen about 50 pips in the last day, while the EUR/CAD has gone down over 100 pips in the same amount of time.

Today, analysts are forecasting that the euro will likely maintain its bearish trend, as there is a lack of impacting news events emanating from Europe. That being said, should either the British Retail Sales report, or the U.S. unemployment figure come in at an unexpected rate, the 16-nation currency may be able to recoup some of yesterday's losses.

JPY - Yen Continues to Make Gains despite Rumors of Government Intervention

Rumors continue to circulate that the Japanese government will soon step in to limit the continued growth of the yen in recent weeks. The Japanese economy is largely export based. When the yen is valued at a high rate, Japanese products are less attractive to foreign buyers.

While the yen continues to make gains against its main currency rivals, it appears that the rumors may be having a slight affect on JPY pairs. The EUR/JPY has steadily gone up in overnight trading, and is currently at the 109.75 level. Similarly, the GBP/JPY has moved up some 60 pips in the last few hours and is trading around the 133.40 level.

Today, yen values will largely be determined by U.S. news events. The yen and dollar are both considered to be safe haven currencies, and the two usually move in a similar fashion. Should any of the news create risk aversion among investors, the yen may continue its profitable run in afternoon and evening trading.

Crude Oil - Oil Prices Continue to Climb Despite Inventories Report

Despite a higher than forecasted U.S. crude oil inventories figure, released on Wednesday, oil prices began rising again throughout yesterday and into overnight trading. Prices are currently up over 120 pips from yesterday's low point before the inventories report was released. Analysts attribute the increase in price to the recent gains made in the U.S. equities market. Furthermore, with the peak of the hurricane season still ahead, demand for oil could still increase.

Today, any gains in the U.S. stock market will likely benefit the price of oil. Furthermore, if the news set to be published today shows any gains made in the U.S. economy, oil prices could increase further as a result.

Technical News

EUR/USD

The short-term bullish channel appears to have been breached recently and indicators are beginning to show a movement into corrective territory. The hourly and daily RSI indicators are both floating in the over-sold territory, and the daily's Stochastic (slow) is moving up from a recent bullish cross. All signs see to be pointing towards an upward corrective movement. Going long may be preferable today.

GBP/USD

This pair continues to float in a short-term bearish channel with few indications for future direction at the moment. The daily RSI appears to show the price just entering the over-sold territory, but still moving downward. The daily Stochastic (slow) also has a very recent bullish cross. The pair seems to be clinging to its bearish momentum, but signals are indicating it could reverse at any moment. It may be worth waiting for this swing before going long.

USD/JPY

This pair has witnessed long-term bearish movements and, surprisingly, the technical indicators show little signs of stopping this directionality. In fact, the hourly chart has the price floating in the over-bought territory, and the 4-hour Stochastic (slow) may be developing a bearish cross in the near future. Going short continues to be the wise choice on this pair.

USD/CHF

This pair continues to float in a tightening range, consolidating towards the 1.0450 price mark. Short-term indicators appear to support future downward movement, but the weekly chart's RSI and Stochastic (slow) show strong indications for bullishness. Momentum for this pair could be building for strong future upward moves. Going long may be the best strategy.

The Wild Card

AUD/CHF

This unique pair appears to be providing early indications of a solid upward movement. It may still be too early to call, but indicators on this pair are just entering the over-sold territory, and a recent bullish cross on the 4-hour Stochastic (slow) highlights the potential for an upward movement. Forex traders have a chance to take a gamble and bet on the continuation of the Aussie's recent strength, with an upward target near 0.9600.

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